Is Construction Rework Killing Your Business?
No one likes it.
Rework means that a job was not completed the first time.
It means that it is going to cost more time, money, and possibly even materials, than anticipated.
It means that your client did not get what they wanted the first time and that your team is spending more time on a job you thought was done.
How Does Construction Rework Happen?
In the best of scenarios, rework occurs through a change order.
Change orders mean that both you and your client recognize that the project requires additional work – work that was not included in the original scope of the project – to be complete.
Read more on how to create a dramatic increase in profits with the use process verification.
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A change order at the end of the project is not what your client wants. What they want is to understand project cost and schedule in real-time, not to be hit with something unexpected.
However, in most cases (up to 80 percent), there are no change orders and your business must cover the additional costs…eating away at your already slim margins.
A satisfied customer is the best business strategy of all. – Michael LeBouef (Click to Tweet)
3 Construction Rework Scenarios
- No…this does not warrant a change order. It was clearly described in the original project scope. The client reviews the completed project and notes that there is something missing. You believe that the “something missing” was never part of the original project. The client disagrees. Your business eats the cost.
- Yes…this is a change. How much will it cost? Are you done yet? Even when the client acknowledges that a change order is warranted, there is pressure to complete the additional work quickly, even before negotiations are complete. Pressure rises and often, it is the vendor who pays the price.
- All of this looks great! Thanks! Perhaps the most dangerous rework is the silent type. Crews often complete additional work during the course of a job, yet that work is never documented. There is no payment, acknowledgement, or record of the work. “Silent rework” distorts estimates and eats into profits.
Profit is not something to add on at the end. It is something to plan for in the beginning. – Megan Nauman (Click to Tweet)
Most construction companies are managing profits based on margin. In an industry where the average profit is only 8 to 20 percent companies can quickly slide from profitable to non-profitable when data is poorly managed.
Unplanned trips to the job site, even when no work is accomplished, pull your teams away from current projects and increase transportation and payroll costs. Simply investigating a rework claim reduces profits.
When Do You Know if a Project Was Profitable?
If it is not until the end of the project…it is too late.
Yet, many construction firms do not have the data they need to assess the profitability of a project until after the job is done.
How many times have you been surprised to learn that the job you thought was operating at a 20 percent margin finishes in the single digits?
Real-time data collection and automated process verification increases the profitability of your telecom construction projects by as much as 20 percent.
How Do You Know If Construction Rework Is Killing Your Profits?
Most companies are not managing projects and margin in real-time. This means that the only way to gauge the impact rework is having on your business health is to check project reconciliation reports, which may not be ready until months after the job is complete. By then, it is too late to do anything about it.
Need to know sooner?
Check your end-of-month financial reports.
Are you paying your vendors more than you did last year, yet business has not increased?
Do your accounts receivable metrics look fantastic, yet accounts payable is straining as the business struggles to keep cash on-hand?
Can you identify the volume of rework in your business?
Do your project estimates account for additional trips to the site or are your estimates painting a “best case scenario” that never really happens?
Rework Mitigation Begins with Project Scope and Ends with Real-Time Data
Clearly documenting the scope of a project, in a way that makes it actionable by everyone on the team, is the first step in mitigating rework.
When everyone performing the work has visibility of the project scope, your teams clearly understand project expectations and are able to work within those expectations.
Collecting process verifying data throughout the project safeguards against rework claims by supplying the managing teams and the client with evidence of completed tasks. It also allows clients to quickly identify perceived discrepancies.
Growth and profit are a product of how people work together. – Ricardo Semler (Click to Tweet)
Implementing a Tool that Does it All with Construction Process Verification
Active Oversight is process verification software that gives your teams the power to effectively communicate project progress and mitigate margin-killing rework.
All tasks and stakeholders are identified at the beginning of the project. Automated data collection (through GPS tracking, in-field photo uploads, and user-driven input) verifies that each task within a project is truly complete before the next task begins.
Armed with real-time, reliable data your business has the resources it needs to understand the profitability of a project before it ends. With this insight, both profit margins and customer satisfaction dramatically increase.
Contact Active Oversight to learn more about how we're helping companies like yours increase profits and employee efficiencies.